Real Estate Appraisal Review Guide: Everything You Need To Know

This article will teach you about the real estate Appraisal Review process.

And so much more let’s dive in.

What is an Appraisal Review?

An appraisal review is like a quality check for real estate appraisals. When someone wants to buy or sell a property, they often get an appraisal done to figure out how much it’s worth. But sometimes, those appraisals might have mistakes or miss important details. That’s where appraisal reviews come in.

During an appraisal review, another expert looks at the original appraisal report. This expert is called an appraisal reviewer. They are like real estate detectives. They examine everything to ensure it’s accurate and fair. They might check if the appraiser used the right methods. They looked at the right information and came up with the right property value.

Think of it this way. The original appraisal is like a school report card for the property’s value. The appraisal review is like the teacher checking it. They check to make sure everything’s right. The goal is to ensure everyone in the real estate deal gets a fair shake. They must trust that the property’s value is accurate.

Why are appraisal reviews needed?

We need appraisal reviews for a few important reasons:

1. Accuracy Assurance: The primary purpose of an appraisal review is to ensure that the valuation of a property provided in the original appraisal report is accurate. This prevents overvaluing or undervaluing properties. That could lead to financial losses or disputes.

2. Compliance: Appraisal reviews help ensure that the original appraisal report complies with industry standards and guidelines, such as the Uniform Standards of Professional Appraisal Practice (USPAP). Compliance is crucial for maintaining the integrity and credibility of the appraisal process.

3. Risk Management: By identifying any errors, inconsistencies, or biases in the original appraisal report, appraisal reviews help mitigate risks for lenders, investors, and other stakeholders involved in real estate transactions. They assure that the property’s value is reliable. The assurance comes from thorough analysis.

4. Decision-making Support: Real estate transactions often involve significant financial decisions. Appraisal reviews give stakeholders more confidence in the property’s value. They support informed decision-making and negotiation.

Appraisal reviews are critical. They promote transparency, accuracy, and trust in the appraisal process. This benefits all parties in real estate transactions.

When is an appraisal review required?

Various circumstances may need an appraisal review, including:

1. Regulatory Requirements: In some cases, regulatory bodies or industry standards, such as the Uniform Standards of Professional Appraisal Practice (USPAP), mandate appraisal reviews for certain types of real estate transactions or under specific conditions.

2. Lender Policies: Many lenders have their own policies and procedures about appraisal reviews. They may need a review. The review could be part of their risk management practices. Or, it could be a standard procedure for certain types of loans or properties.

3. Client Requests: Clients involved in real estate transactions, such as buyers, sellers, or investors, may request an appraisal review if they have concerns about the accuracy or fairness of the original appraisal report. This could be because of differences in property value. Or it could be doubts about the appraisal method. Or it could be suspicion of bias.

4. Dispute Resolution: In cases where there is disagreement or dispute about the value of a property, an appraisal review may be requested by one or both parties as part of the resolution process. This helps ensure that the valuation is fair and based on reliable information.

5. Quality Control: Appraisal management companies (AMCs) or appraisal reviewers themselves may conduct reviews as part of their quality control processes to ensure that all appraisals meet certain standards of accuracy, reliability, and compliance.

The need for an appraisal review can arise in many situations. There, people must verify the accuracy, completeness, and reliability of an original appraisal.

Who Can Be an Appraisal Reviewer?

Several types of individuals or entities can serve as appraisal reviewers:

1. Experienced Appraisers: Seasoned real estate appraisers with extensive knowledge and expertise in the appraisal process can often serve as appraisal reviewers. They understand appraisal methods, market analysis, and industry standards well. This allows them to assess the accuracy of appraisal reports.

2. Appraisal Management Companies (AMCs): These companies specialize in managing the appraisal process for lenders, financial institutions, and other clients. They may have in-house appraisal reviewers. They review appraisals for their clients. AMCs ensure that their reviewers have the necessary qualifications. The reviewers also follow industry standards.

3. Certified Review Appraisers: Some individuals hold specific certifications or designations in review appraisal, demonstrating their expertise in conducting appraisal reviews. These appraisers are certified. They have had specialized training and education. This training lets them effectively evaluate the quality and compliance of appraisal reports.

4. Independent Consultants: Independent consultants or consulting firms may offer appraisal review services to clients in need of an unbiased assessment of appraisal reports. These consultants usually have a background in real estate appraisal. They have the skills to conduct thorough reviews.

5. Government Agencies: Regulatory bodies or government agencies may employ appraisal reviewers to ensure compliance with appraisal standards and regulations. They may oversee appraisals for federal transactions. They may also enforce appraisal laws.

Reviewers should understand real estate appraisal principles well. They need a keen eye for detail. They must provide fair assessments of appraisal reports. They are crucial. They maintain the integrity and reliability of real estate appraisals.

Types of appraisal review reports

There are several types of appraisal review reports. Each serves a specific purpose. They check the accuracy and reliability of an original appraisal report. Here are some common types:

1. Field Review Reports: These reports involve an on-site inspection of the property by the appraisal reviewer. They check the property’s condition. They verify its features and compare them to the appraisal report. Field review reports are used when a more detailed property assessment is needed.

2. Desk Review Reports: Desk review reports are conducted without a physical inspection of the property. Instead, the reviewer examines the original appraisal report and its supporting documents. They also look at relevant market data from their desk. They check if the appraisal method, data analysis, and conclusions are accurate. The original appraiser made these.

3. Technical Review Reports: Technical review reports focus on the technical aspects of the original appraisal report, such as the application of appraisal methodologies, compliance with industry standards (e.g., USPAP), and adherence to specific client requirements. These reports provide a detailed analysis of the appraisal’s technical soundness and reliability.

4. Compliance Review Reports: Compliance review reports evaluate whether the original appraisal report complies with applicable laws, regulations, and industry guidelines. They ensure the appraisal meets specific rules and ethics. USPAP outlines these. Review reports are vital. They maintain the integrity and legality of appraisals.

5. Narrative Review Reports: Narrative review reports provide a comprehensive written analysis of the original appraisal report, detailing the reviewer’s findings, observations, and conclusions. The reports often include explanations. They cover any discrepancies or issues found during the review. They may offer suggestions for fixing problems or further investigation.

Each type of appraisal review report has a distinct purpose. It assesses the quality and reliability of the original appraisal report. Which type to use depends on the review’s needs. It also depends on the complexity of the appraisal being evaluated.

Who would order an appraisal review and under what circumstances?

Various parties in real estate or regulatory processes may order an appraisal review. They do so under the following circumstances:

1. Lenders and Financial Institutions: Lenders often order appraisal reviews as part of their risk management procedures before approving mortgage loans. They want to ensure that the property’s value is accurate and reliable. This will reduce the risk of default.

2. Buyers and Sellers: Buyers or sellers involved in real estate transactions may request an appraisal review if they have concerns about the accuracy or fairness of the original appraisal report. They may suspect errors or discrepancies. These could impact the property’s value. They want an independent assessment to ensure a fair deal.

3. Investors and Developers: Investors or developers considering purchasing or developing properties may order appraisal reviews to verify the accuracy of the appraisals provided by sellers or to assess the potential value of investment opportunities accurately.

4. Government Agencies and Regulators: Government agencies and regulatory bodies may require appraisal reviews as part of their oversight of real estate transactions or compliance with appraisal standards and regulations. These reviews help ensure transparency, fairness, and compliance with applicable laws and regulations.

5. Legal Proceedings: Appraisal reviews may be ordered in the context of legal proceedings, such as disputes over property values, eminent domain cases, or divorce settlements. The involved parties may seek separate appraisals. They use them to support their claims in court.

Any party in real estate or regulation may order appraisal reviews. They want assurance about the accuracy, reliability, and fairness of property valuations. They want it in the original appraisal reports.

What happens after an appraisal review?

After an appraisal review, several things may happen. This depends on the review’s findings and the transaction’s specifics.

1. No Action Required: If the appraisal review concludes that the original appraisal report is accurate, reliable, and compliant with industry standards and guidelines, no further action may be necessary. The report may confirm the property’s value. This would assure the people in the transaction.

2. Revisions to the Original Appraisal Report: If the appraisal review identifies errors, discrepancies, or deficiencies in the original appraisal report, the appraiser who conducted the original appraisal may be required to make revisions or corrections. The revisions aim to fix issues found during the review. They will ensure the accuracy and completeness of the property valuation.

3. Additional Information or Documentation Requested: In some cases, the appraisal reviewer may request additional information or documentation from the original appraiser to clarify certain aspects of the appraisal report or provide further evidence supporting the property valuation. This extra info may help resolve any discrepancies. It could address concerns from the review.

4. Further Investigation or Analysis: If significant discrepancies or concerns are identified during the appraisal review, further investigation or analysis may be necessary to assess the accuracy and reliability of the property valuation. This might mean more research or data analysis. It could also mean asking experts for help with any unresolved issues.

5. Resolution Discussions: In cases where there are disagreements or disputes between the original appraiser and the appraisal reviewer regarding the property valuation, discussions may be initiated to resolve the differences and reach a consensus. These discussions may involve mediation, negotiation, or more review by a third-party expert.

The actions after an appraisal review aim to fix any identified issues. They also make sure the property valuation is accurate, reliable, and fair. The main goal is to help decisions and make real estate deals succeed.

What Happens When the Appraiser and Appraisal Reviewer Disagree?

The appraiser and reviewer disagree on parts of the property’s value. They can take steps to address and resolve the issue:

1. Discussion and Clarification: The appraiser and appraisal reviewer may engage in discussions to clarify their respective positions and understand the basis of each other’s conclusions. This dialogue lets them find areas of disagreement. They can then explore solutions together.

2. Further Analysis or Research: If the disagreement stems from differences in data interpretation, methodology, or market analysis, the team may conduct additional analysis or research to gather more information and evidence supporting each perspective. This could involve reviewing more market data. It could also mean consulting with experts or doing research.

3. Mediation or Third-Party Review: In cases where the disagreement persists despite discussions and additional analysis, mediation or third-party review may be pursued to help resolution. A neutral mediator or expert can give an objective assessment. They do this of the conflicting views and help the parties find common ground.

4. Escalation Procedures: If informal resolution attempts are unsuccessful, formal escalation procedures may be initiated to address the disagreement. This could involve raising the issue to higher-level management within the appraisal firm. Or, it could involve seeking help from regulatory bodies or industry associations.

5. Revisions or Amendments to the Appraisal Report: Depending on the nature and extent of the disagreement, revisions or amendments may be made to the original appraisal report to address any inaccuracies, inconsistencies, or deficiencies identified during the review process. These revisions aim to ensure the accuracy and reliability of the property valuation.

6. Documentation and Documentation of Disagreement: Throughout the resolution process, it’s important to document the disagreement and the steps taken to address it. This documentation helps keep things clear and accountable. It provides a record of the discussions, analyses, and decisions to fix the issue.

The goal is to solve disagreements between the appraiser and reviewer. The goal is to agree on the property’s value. And, to ensure the appraisal report reflects the property’s market value. Good communication, collaboration, and a commitment to resolving differences are key. They must be constructive. They are key to achieving this goal.

Why Is It Important That the Appraisal Reviewer Be Independent?

It’s crucial for the appraisal reviewer to be independent for several reasons:

1. Objectivity: An independent appraisal reviewer can provide an unbiased assessment of the original appraisal report without any conflicts of interest. They are not swayed by personal relationships or money. They check based on the merits of the appraisal and the market data.

2. Impartiality: Independence helps ensure that the appraisal reviewer approaches the review process with impartiality and fairness. They do not serve any party in the real estate transaction. This lets them assess the appraisal report and without favoritism.

3. Credibility: The independence of the appraisal reviewer enhances the credibility of the review process and the integrity of the appraisal report. Those in the transaction can trust that the review is fair and clear. It will boost confidence in the property’s value.

4. Compliance: Independence is often a requirement for appraisal reviewers to comply with industry standards and regulations, such as the Uniform Standards of Professional Appraisal Practice (USPAP). Following these standards helps keep the professionalism and ethics of real estate appraisers.

5. Risk Management: Independence mitigates the risk of potential conflicts of interest or bias influencing the outcome of the appraisal review. By staying independent, the reviewer can focus on judging only the report’s accuracy. They can also focus on its reliability. This reduces the chance of errors or omissions.

Independence is key. It ensures the integrity, credibility, and reliability of the review process. It builds trust among stakeholders. It upholds professional standards. It boosts confidence in property valuations’ accuracy.

How to find an Review Appraiser near me?

Finding a review appraiser near you involves a few steps:

1. Online Search: Start by conducting an online search using search engines or real estate appraisal directories. You can use search terms like “appraisal review appraiser near me.” Or, you can search for “real estate appraisal review services in [your location].” This should give you a list of local review appraisers. It will also show companies that offer review appraisals.

2. Real Estate Associations: Check with local or national real estate appraisal associations, such as the Appraisal Institute or the American Society of Appraisers. These groups often have directories or referral services. They can help you find qualified review appraisers in your area.

3. Referrals: Ask for recommendations from real estate professionals, such as real estate agents, mortgage brokers, or property managers, who may have worked with review appraisers in the past. They can show the quality and reliability of appraisers they have worked with. They can help you find a reputable review appraiser.

4. Appraisal Management Companies (AMCs): Contact appraisal management companies operating in your area. These companies manage the appraisal process for lenders. They may have a network of qualified review appraisers in your area.

5. Verify Qualifications: Once you have a list of potential review appraisers, take the time to verify their qualifications, credentials, and experience. Look for appraisers certified or licensed by recognized organizations. They should have experience doing appraisal reviews in your local market.

6. Ask Questions: Before hiring a review appraiser, schedule a consultation or interview to discuss your specific needs and ask questions about their experience, process, and fees. Clarify expectations. Ensure the appraiser knows your type of property or transaction.

Follow these steps. You can find a qualified review appraiser near you. They can provide the expertise and guidance you need. They are for your real estate appraisal review.

My own personal experience as an Appraisal Reviewer

I have reviewed thousands of appraisals over 20 years. Not all licensed appraisers and appraisal reports have the same level of quality and accuracy.

About the Author

Matthew Reynolds, MAI is a commercial real estate appraiser with Vanguard Realty Advisors. He has been appraising commercial real estate for +20 years. He has done simple and complex appraisal assignments, including land appraisals. He can help you navigate and understand the commercial appraisal process. Please contact him for any appraisal services or to request a quote.